Half of British savers are suffering from ‘investophobia’ and prefer cash to any stocks and shares investments despite the low interest rate environment, according to research.
A Scottish Friendly study of 2,000 UK savers found 53 per cent would not consider investing in stocks and shares, the most common reason being a fear of losing money.
This is despite a combination of inflation and rock bottom rates on cash accounts reducing the value of savings in real terms.
Two thirds of savers said they are aware that interest rates on savings accounts are less than the current rate of inflation, but the fact they are losing money in real terms seemed to do little to change their minds.
Calum Bennie, Scottish Friendly’s savings specialist, said: "By holding savings exclusively in cash at the moment many British savers are effectively letting their money diminish.
"Every pound that they save becomes less valuable while held in an account that delivers returns below the rate of inflation.
"Worryingly, our findings suggest the savings and investment decisions of so many Brits are being driven by a nagging fear of losing money and this ‘investophobia’ may be clouding personal judgement when it comes to important financial decisions."
The study, which was published today (13 July), also showed while 39 per cent of savers feel more comfortable with keeping savings in cash, 29 per cent save their money in cash because it is what they have always done.
A group of 28 per cent said they view financial products as too complex and cannot understand them, while 25 per cent do not believe investing in shares or a stocks and shares Isa is an affordable option for them.
The analysis also found that 12 per cent are put off by the investment jargon used by financial services providers.
Alex Reynolds, an adviser with Advies Private Clients, said: “This fear is created from a lack of knowledge for sure and then the hype from the media whenever anything bad happens in the markets. You rarely hear a report on how well the markets performed."
He said: “It boils down to educating a client on the reality of sitting on cash and the impact inflation will have on its buying power over time.
“It is also down to helping clients understand their short, medium and long-term goals so you can save and invest in the right way for each of these.
“When a new client comes to me we discuss their objectives and then I explain how these can be reached and the risks and rewards involved in investing. We also look at their capacity and need to take risk as not everyone needs to take a lot of risk.”
Aamina.zafar@ft.com
